Contract
expenditures represent a significant outlay of Internal Revenue Service (IRS)
funds.TIGTA has made a commitment to
perform audits of these expenditures.To
the extent our reviews assist the IRS in identifying and recovering inaccurate,
unsupported, and unallowable charges, contract expenditures are reduced and
taxpayer funds are saved.

WHY TIGTA DID THE AUDIT

This audit was initiated to determine whether selected invoices
submitted and paid under contract number TIRNO-03-K-00167 were appropriate and
in accordance with the contract’s terms and conditions.

The purpose of our audit was to answer the following
questions:

1.What is the
process the IRS established for invoice verification prior to certifying
payment to the contractor?

2.Were the invoice
charges submitted by the contractor and paid by the IRS accurate, supported,
and allowable?

3.Were the
deliverables obtained through the contract acceptable as stipulated in the
contract?

WHAT
TIGTA FOUND

TIGTA identified questionable charges of $744,340.78 because
the contractor did not provide the necessary documentation to support that the
charges were accurate and allocable to the contract.The details of these questionable charges
were provided to the IRS and contractor personnel in June 2006, October 2006,
and December 2006.It was not until
after the questionable charges were presented in a January 2007 discussion
draft report that the IRS provided adequate documentation to support all but $22,536.21
of the questionable labor charges.

The IRS did not have a complete invoice verification process
established, especially in the area of documenting the verification of support
for billed labor and travel charges.During
the period when these charges were invoiced by the contractor, the IRS did not
review, as part of its invoice verification process, any source documents such as
contractor-provided payroll or related payment records to confirm labor charges
or receipts to confirm travel charges.

TIGTA believes the initial identification of the unsupported
labor and travel charges was directly related to the incomplete invoice
verification process.If the IRS was
periodically or routinely requiring the contractor to provide such
documentation, the contractor would have been able to react in the same manner
to our requests for support.

This contract was designed to provide professional financial
and accounting services to assist the IRS in preparing its annual financial
statements and in the resolution of material weaknesses and other issues
identified in audits of those financial statements.During the review, nothing came to our
attention that would lead us to believe there were significant problems with contractor
performance or any of the deliverables associated with the invoices included in
our tests.

WHAT TIGTA RECOMMENDED

The
Director, Procurement, should require the appropriate Contracting Officer to
review the identified questionable charges of $22,536.21 and initiate any recovery
actions deemed warranted.

In their response to the report, IRS officials stated they
agreed with our recommendation.The
Contracting Officer is working closely with the contractor to obtain additional
documentation.Upon receipt of the
supporting documentation, the Contracting Officer will conduct a thorough
analysis, determine the amount of any recoverable costs, and initiate the
appropriate action to recover those costs.

READ THE
FULL REPORT

To view the report,
including the scope, methodology, and full IRS response go to: